Japanese Automakers Regain a Foothold and Make Gains in Emerging Markets

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John Humphrey

After slogging through several years of turbulent times that included a mix of vehicle quality challenges, widespread internal restructuring, and a rash of unavoidable natural disasters, Japanese automakers are starting to regain their footing and reassert themselves in markets around the world. In particular, Japan’s largest brands—Toyota, Nissan, and Honda—are performing especially well in the world’s largest emerging markets—China, India, and Brazil. For example:

• In China—a market where total passenger-vehicle sales grew 9% in the first 6 months of the year to 6.9 million units—Nissan sales increased 18% during the same period (making Nissan the second-best-selling brand in China, behind perennial leader Volkswagen). Toyota’s sales jumped 31% (making it the third-best-selling brand), while Honda sales grew 17% (making it the seventh-best-selling brand).

• In India, Japanese brands by far outpaced their competitors in year-over-year growth. Passenger-vehicle sales in India are up 12% through the first half of the year to 1.3 million vehicles. Toyota sales are up 69% (making it in the fifth-best-selling brand), Honda sales have climbed 85% (the eighth-best-selling brand in India) and Nissan sales are up 160% (making it the 10-best-selling brand).

• In Brazil, where Japanese automakers are relative latecomers to the market, Japanese brands are beginning to acquire market share. Industry sales declined 2% in the first half of the year, but Toyota (up 9%), Nissan (up 30%), and Honda (up 5%) were able to stand firm against this decline—even as a majority of their major competitors saw flat or negative growth.

Factors Leading to Japan’s Impressive Global Growth

What’s behind the impressive growth by Japan’s Big Three in 2012? To be sure, Japanese automakers lost sales in 2011 due to setbacks in production operations that were severely hindered by the earthquake and tsunami in Japan, and the floods in Thailand (Thailand is a production base for many key components used at Japanese production facilities around the world). So, part of their year-over-year sales increases can be attributed to making up for lost sales opportunities in 2011.

However, based on feedback from consumers, there is more to the resurgence of Japanese brands in these important growth markets than simple production capacity. It appears that the Japanese automakers have returned to their important “Keizen” fundamentals of providing quality, value, and high customer (or owner) satisfaction.

Initial Quality, After-Sales Satisfaction Bolster Japanese Brands’ Sales Performance

In our most recent syndicated automotive studies for the China market, Honda, Nissan, Toyota ranked among the top five brands in initial quality, among the top five brands in after-sales customer satisfaction, and among the top six brands in vehicle dependability. Most of the time, Japan’s Big Three brands outperformed their direct competitors in the Non-Premium brand segments. What’s more, Japan’s Big Three frequently competed successfully with Premium luxury brands—from Germany, Japan and the United States—whose vehicles and services are typically priced two to three times more than Japan’s Big Three brands.

Japanese Brand Quality, Dependability Earn Customer Approval in India, Brazil

When we examine India and Brazil, the results are quite similar for Japanese automakers: Rising sales, increasing market share, and extensive customer plaudits—and the associated high ratings from vehicle owners for the quality, dependability, and service satisfaction they receive from Japanese brands.

It’s no coincidence that the fastest-growing auto brands—even in slow or declining markets—are those that vehicle owners consider to have the highest quality, dependability and satisfaction. Having endured tough times in the recent past, Japanese automakers were forced to take a long look in the mirror, make a candid assessment of their strengths and weaknesses, and adjust accordingly. Having crossed their river of self-evaluation and earnest reform, they have emerged stronger on the other side.

While no competitor is likely to concede sales and share without a fight in the world’s largest growth markets, global automakers are going to have to be on their game in order to compete with a rejuvenated Japanese industry.—John Humphrey, senior vice president of global automotive at J.D. Power and Associates.

Note: This column has been published in the Tokyo-based Nikkan Jidosha Shimbun, which is a daily automotive newspaper and site. J.D. Power’s Tim Dunne, director of global automotive industry analysis, contributed to this column.